Artificial intelligence: Adobe's software must drive profits
Hi tech. The technology giant has had a weak performance on the stock exchange so far. The market appreciated the latest quarterly report, but the challenge is to sustain growth
class="dinomecognome_R21"> Vittorio Carlini
5' min read
5' min read
Artificial intelligence. These are the two magic words that, rightly or wrongly, have driven the stock markets and technology companies. Particularly those that produce software systems. Yet there are those who, despite being part of the latter sector, have not so far benefited from the magic wand of Artificial intelligence (AI) on the stock exchange.
Stock market trends
.An example? Adobe. The US creative software giant only grew by 7.49% in the last year (closing on 18/6/2024). In 2024, then, the performance is negative (-12.46%). The percentages would be even weaker, however, if the calculation were made before the publication of the latest quarterly report. On the day following (14 June) the numbers for the second quarter of the 2023-24 financial year, the group's share price jumped by more than 16%. In other words: on the one hand, an important contribution to the trend of the last period can be attributed to a single session; on the other hand, the market appreciated the quarterly figures.
The profit and loss account numbers
.What actually happened? Adobe first of all posted higher than consensus revenues (USD 5.31 billion) and adjusted net profitability (USD 4.48 earnings per share) than consensus. In addition, the company, citing AI as one of the reasons, updated its estimates for the third quarter and improved those for the entire financial year 2023-24. Thus: with regard to the current quarter, in the case of turnover the range of 5.33 to 5.38 billion was indicated (5.4 billion was the market expectation); with regard to non-GAAP adjusted earnings per share the guideline is 4.5 to 4.55 dollars, against a consensus of 4.48 dollars.For the full year 2023-24, revenues are now estimated at between $21.4 billion and $21.5 billion ($21.3 billion and $21.5 billion the previous range), with market forecasts stabilised at $21.46 billion; non-GAAP adjusted earnings per share, on the other hand, are expected to be between $18 and $18.2 ($17.6-18 the March forecast), compared to the market's estimate of $18.02.
In short: there was a general improvement in the outlook, which was appreciated by investors. Not least because, on the one hand, among the various motivations is the appeal of Artificial Intelligence. And on the other hand, various competitors - such as SentinelOne, UiPath or Veeva - have on the contrary lowered their forecasts for the third quarter in the wake of the weak economy and demand for AI itself. That said, however, one swallow does not make a summer. Consequently, the do-it-yourselfer before assuming that Adobe has - really - started monetising AI needs to be careful.
Social Object
.Yeah, pay attention! But is the company, then, on the right track to extract value from AI? In order to answer this question, it is useful to recall the corporate purpose of the group. Adobe, apart from a residual part of the business (e.g. eLearning services), divides the business into two areas: Digital media (73.2% of revenues 2022-23) and Digital experience (25.2%). The former, to which Adobe creative cloud and Adobe document cloud belong, includes various tools (from Photoshop to Illustrator to Premiere) used by creative professionals (e.g. photographers, video editors, game developers). Furthermore - also in digital media - there is Adobe's PDF technology - with applications such as Acrobat and Acrobat Sign - aimed at offering complete digital workflows for documents.
